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12th October 2018
Regulators must work together to avoid breakdown in cross-border financial services, says UK Finance
The Bank of England’s Financial Policy Committee has warned that the EU must take swift action to ensure legal certainty on an estimated £41trn worth of derivatives contracts set to mature after the UK leaves the EU.
In its quarterly report on financial stability, the Committee said that unless EU regulators announce before the end of the year that banks based in the bloc will continue to be able to clear derivatives through London-based clearing houses, such banks will have to conduct their derivatives trades within the EU, incurring substantial costs in doing so.
Stephen Jones, Chief Executive of UK Finance, said: “The Bank of England is right to underline the pressing need for UK and EU regulators to work together and avoid a serious breakdown in cross-border financial services in the event of a ‘no deal’ Brexit.
“It is crucial that cliff-edge issues surrounding the continuity of contracts and transfer of personal data are addressed to minimise disruption for firms and their customers on both sides of the Channel.
“Decision-makers in the EU should treat these critical business disruption issues with appropriate urgency, given the potential economic consequences for both sides if adequate solutions are not found in good time.
“Ultimately, we believe a no deal scenario must be avoided and efforts focused on securing an appropriate transition period, as well as an extensive future economic partnership that allows for cross-border trade in financial services.”